State bank endeavours to constrain inflation

March 01, 2011 | 10:35

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The State Bank of Vietnam (SBV) will make moves to reduce the dollarisation of the national economy to use the VND as the only means of payment in the country, said a SBV senior official.

Solutions to dollarisation will be submitted to the government as part of the SBV’s moves to constrain inflation, stabilise the macro-economy and ensure social welfare in line with the government’s plans.

According to the SBV’s deputy governor Nguyen Van Binh, measures will be taken to make credit organisations switch from mobilising and lending in foreign currencies to buying and selling foreign currencies.

The SBV will also adjust the lending mechanisms for foreign currencies based on the principle that loans in foreign currencies will serve only essential production and services sectors, which, in return, earn foreign currencies from their business and production activities.

Strong measures will also be applied to tighten control of the use, buying and selling of foreign currencies.

In another move, the SBV will submit to the government a decree on the management of gold-trading activities in the second quarter of this year.

The decree is also looking to gradually stop the trading of gold bars on the unofficial market and cross-border gold smuggling in the country.

To control inflation, the SBV will also lower the credit growth rate to below 20 per cent instead of the 23 per cent set early this year.

Commercial banks will now be required to minimise loans for non-production activities, especially those for real estate and securities purposes.

To support commercial banks, the SBV will adjust the risk contingency ratio and other safety ratios so the credit flow is directed to crucial production and business activities.

Credit interest rates will be controlled to stay at appropriate levels to raise the value of the VND and curb the trend of borrowing in foreign currencies instead of in dong.